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Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Bank of Gansu Co., Ltd. (HKG:2139) share price is down 13% in the last year. That's well bellow the market return of 6.8%. We wouldn't rush to judgement on Bank of Gansu because we don't have a long term history to look at. It's up 4.8% in the last seven days.
View our latest analysis for Bank of Gansu
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Unhappily, Bank of Gansu had to report a 58% decline in EPS over the last year. This fall in the EPS is significantly worse than the 13% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Bank of Gansu's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Bank of Gansu the TSR over the last year was -8.2%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Given that the market gained 6.8% in the last year, Bank of Gansu shareholders might be miffed that they lost 8.2% (even including dividends) . While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 4.9% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before spending more time on Bank of Gansu it might be wise to click here to see if insiders have been buying or selling shares.